In a big relief to crisis-hit Infrastructure Leasing and Financial Services (IL&FS), the National Company Law Appellate Tribunal (NCLAT) on Monday stayed all legal proceedings against the company and its 348 subsidiaries over any past or future loan defaults ’till further order’. The company may have faced 70-80 legal suits had the moratorium not been granted.
News agency PTI reported that NCLAT stayed all proceedings against IL&FS “till further order”, following a decision by Mumbai bench of National Company Law Tribunal (NCLT) which had refused to grant a 90-day moratorium over loans. The Ministry of Corporate Affairs had requested the court to restrain creditors of IL&FS from filing suits in case of non-repayment of loans.
The lawyers of IL&FS had argued that the company and its subsidiaries would face at least 70-80 legal suits if the moratorium is not granted. The two-member NCLAT bench headed by Justice S J Mukhopadhaya asked top five lenders of IL&FS to submit their replies on the 90-day moratorium.
The crisis at IL&FS came to light last month when the infrastructure financing giant defaulted on Rs 1,000 crore from Small Industries Development Bank of India (SIDBI). After a few more defaults over the month, the government on October 1 superseded the company’s board and appointed a new board under top banker Uday Kotak following the resignation of MD and CEO Ramesh Bawa along with five directors.
Meanwhile, it was also reported that the National Highway Authority of India (NHAI) may acquire incomplete projects of IL&FS for revival or inviting new bid. The Kotak-led board also held two meetings in which top executives were appointed.
The board, after its first meeting on October 4, said that the crisis at IL&FS is much more complex and would need time to resolve; however, also allying market fears by saying that it was not an impossible task to do. The non-banking financial companies (NBFCs) are under pressure due to the liquidity crunch at IL&FS. Dewan Housing Finance Corporation Ltd (DHFL) fell as much as 60% on September 21 on news of IL&FS defaults, before paring some losses.
IL&FS has a total debt of Rs 91,000 crore, of which Rs 57,000 crore is from PSU banks. The company needs an immediate capital infusion of Rs 3,000 crore.
